CCE, MUMBAI Vs RDC CONCRETE (INDIA) PRIVATE LIMITED
Bench: MUKUNDAKAM SHARMA,ANIL R. DAVE, , ,
Case number: C.A. No.-004409-004409 / 2010
Diary number: 10204 / 2010
Advocates: Vs
RAJESH KUMAR
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 4409 OF 2010
COMMISSIONER OF CENTAL EXCISE, BELAPUR, MUMBAI .....APPELLANT.
VERSUS
RDC CONCRETE (INDIA) P. LTD. .....RESPONDENT.
J U D G M E N T
ANIL R. DAVE, J.
1. Being aggrieved by the Order dated 23rd November, 2009, passed in
Appeal No.E/2032/06-Mum. by the Customs, Excise & Service Tax
Appellate Tribunal (CESTAT), West Zonal Bench at Mumbai, this appeal
has been filed by the Revenue – Commissioner of Central Excise, Belapur,
Mumbai.
2. By virtue of the impugned order, the CESTAT has rectified its Order
dated 4th November, 2008 passed in Appeal No.E-2032-2033/06 in
pursuance of an application for rectification filed by the present respondent-
assessee under Section 35C(2) of the Central Excise Act, 1944 (hereinafter
referred to as ‘the Act’).
It is the case of the appellant that the aforestated final order dated 4th
November, 2008 passed by the CESTAT has been rectified in pursuance of
the application filed by the respondent herein. The case of the appellant, in
this appeal, is that under the garb of rectification, the CESTAT has modified
its order dated 4th November, 2008 in such a way as if the respondent
asessee had filed an appeal against the said order and the CESTAT has
virtually allowed the appeal against its own order.
3. Mr. B. Bhattacharya, learned Additional Solicitor General, appearing
for the Revenue submitted that the CESTAT has limited power to rectify its
mistake under the provision of Section 35C(2) of the Act. The relevant
portion of the said section reads as under:
“35C(2) - The Appellate Tribunal may, at any time within six months from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1) and shall make such amendments if the
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mistake is brought to its notice by the Commissioner of Central Excise or the other party to the appeal………”
The learned counsel submitted that as per the language of the aforestated
sub-section, it is clear that the Appellate Tribunal, i.e. the CESTAT has
power to rectify any mistake which is apparent from the record of any order
passed by it under Section 35C(1) of the Act. The learned counsel submitted
that the CESTAT had passed final order dated 4th November, 2008 in an
appeal filed before it by the respondent. By virtue of the final order passed
in the said appeal filed by the respondent, the CESTAT had upheld the
demand of duty of Rs.90,89,480.56 together with interest and equivalent
penalty of Rs.90,89,480.56 but the order imposing penalty of
Rs.25,00,000/- had been set aside. Moreover, the penalty imposed upon
Shri Sanjay Bahadur had been reduced to Rs.1,00,000/-.
4. In pursuance of the application submitted by the respondent for
rectification, the CESTAT modified the original final order to such an extent
that the entire demand of duty has been quashed and set aside and as a
consequence thereof the penalty imposed upon the respondent company and
upon the Directors of the company has also been set aside.
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5. The learned counsel appearing for the Revenue submitted that in
pursuance of the rectification application, the CESTAT has not only
substantially changed its order but has also changed its legal view on the
subject. According to him, while rectifying any order, the CESTAT can
rectify any mistake which is apparent from the record. Under the guise of
rectification, the CESTAT cannot altogether take a different view in law and
it cannot reappreciate evidence which had been led before it.
6. He further submitted that the CESTAT has practically reviewed its
order though it has no power to review its order and, therefore, it was not
open to the CESTAT to review the decision rendered by it on 4th November,
2008. He further submitted that no judicial or quasi judicial authority has
power to review its order unless the statute gives such a power.
7. Coming to details, as to how the CESTAT exceeded its jurisdiction,
the learned counsel narrated the facts in a nutshell. He submitted that the
respondent-company is a manufacturer of ‘Unipaved Interlocking Concrete
Blocks’ (pavers), being excisable goods falling under chapter 68 of the
First Schedule to the Central Excise Tariff Act, 1985. In pursuance of
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specific information received by the Department of Central Excise with
regard to evasion of duty by the respondent, officers of the Head Quarters
(Preventive) Wing had given a surprise visit to the factory premises of the
respondent on 13th February, 2002 and had checked the company’s record
and recorded statements of its officers. In pursuance of investigation, it was
found that the pavers manufactured by the respondent were valued by the
respondent at Rs.250/- per sq. mtr. and accordingly excise duty was paid
thereon. The said pavers were sold by the respondent to a related person or
its inter-connected company – M/s. Unitech Ltd. (UTL) for Rs.531/- per sq.
mtr. and thereafter UTL was selling the same for Rs.826.50 per sq. mtr. to
Senorita Builders Pvt. Ltd. Thus, according to the learned counsel, the
goods manufactured by the respondent were shown at a substantially low
value only for the purpose of evasion of excise duty.
8. In the aforestated circumstances, a Cost Accountant was appointed to
ascertain value of the goods manufactured by the respondent. The Assistant
Director (Cost) of the Excise Department, who was a Cost Accountant, was
appointed, though he was in service of the Department. An objection was
raised by the respondent before the CESTAT at the time of hearing of the
appeal referred to hereinabove that an employee of the Department, who
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was not in practice as a Cost Accountant, could not have been appointed to
ascertain value of the goods manufactured by the respondent.
9. The aforestated objection raised by the respondent was duly
considered by the CESTAT and was rejected for the reason that the Act or
Rules made thereunder nowhere provides that only a Cost Accountant, who
is in practice should be appointed to ascertain value of the goods, when the
Revenue feels that the value of the goods shown by the concerned
manufacturer is required to be ascertained. In pursuance of the rectification
application, the CESTAT had heard the matter again and a similar objection
was raised by the respondent in the rectification application. Once again it
was submitted before the CESTAT that an officer of the department,
though a Member of the Institute of Cost and Works Accountants of India,
could not have been entrusted with the work of ascertaining the value of the
goods because the person so appointed was in service of the department and
was not in practice. The learned counsel submitted that after hearing the
rectification application, the CESTAT accepted the aforesaid submission
(which had not been accepted by the CESTAT earlier) and the valuation
arrived at by the Cost Accountant was not accepted by the CESTAT and
accordingly the order was modified.
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10. The learned counsel for the Revenue submitted that the CESTAT
could not have changed its view as stated above because what was
permissible to the CESTAT was only rectification of a mistake, if found
apparent from the record. The interpretation with regard to the provision
relating to the appointment of the Cost Accountant, which the CESTAT had
accepted at an earlier point of time could not have been changed by the
CESTAT while deciding the rectification application because by changing
the legal view, the CESTAT was not rectifying any mistake apparent from
the record but the CESTAT was changing its view altogether, which is not
permissible under the provision of Section 35C (2) of the Act.
11. Similarly, the learned counsel further submitted that the CESTAT had
earlier arrived at a finding that the respondent company had sold its
excisable goods to a related person or an inter-connected undertaking at a
particular price and immediately thereafter the inter-connected company had
sold the very same goods at much higher price to another company. The
CESTAT had earlier come to a conclusion that it was nothing but an attempt
to evade duty and subsequently, in pursuance of the rectification application,
the CESTAT took altogether a different view whereby it came to the
conclusion that the company with which the respondent-assessee had
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dealings, was in no way inter-connected. Thus, the facts which had been
ascertained at an earlier point of time were found to be incorrect or the
CESTAT had reappreciated evidence while deciding the rectifying
application.
12. According to the learned counsel, the CESTAT should not have re-
appreciated the evidence so as to come to a different conclusion while
exercising its power under Section 35C(2) of the Act.
13. The learned counsel relied upon judgments of this Court in
Commissioner of Central Excise, Calcutta v. Ascu Ltd., Calcutta
2003(9) SCC 230, Commissioner of Central Excise, Vadodara v. Steelco
Gujarat Ltd. 2003(12) SCC 731, Deva Metal Powders Pvt. Ltd. v.
Commissioner, Trade Tax, U.P. 2008(221) E.L.T 16 and Mepco
Industries Limited, Madurai v. Commissioner of Income Tax and
Another 2010(1) SCC 434.
14. On the other hand, the learned counsel for the respondent-assessee
submitted that it was open to the CESTAT to change its view because it
apparently noted its mistakes which had been committed while passing its
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earlier order dated 4th November, 2008. The counsel further submitted that
the view expressed by this Court in the judgments referred to by the learned
counsel appearing for the appellant had been subsequently changed in the
judgments delivered in cases of Commissioner of Central Excise,
Mumbai v. Bharat Bijlee Limited, 2006 (198) ELT 489, Honda Siel
Power Products Ltd. vs. Commissioner of Income Tax, Delhi , 2008(221)
ELT 11 and of Saci Allied Products Ltd. v. Commissioner of C. Ex.,
Meerut, 2005 (183) ELT 225. Thus, the learned counsel submitted that the
CESTAT did not exceed its power and rightly rectified the mistakes which
were apparent on the record while deciding the rectification application.
15. We heard the learned counsel at length and also considered the
judgments cited by them and the orders passed by the CESTAT.
16. Upon perusal of both the orders viz. earlier order dated 4th November,
2008 and order dated 23rd November, 2009 passed in pursuance of the
rectification application, we are of the view that the CESTAT exceeded its
powers given to it under the provisions of Section 35C(2) of the Act. This
Court has already laid down law in the case of T.S. Balram v. M/s.Volkart
Brothers, 82 ITR 50 to the effect that a “mistake apparent from the record”
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cannot be something which can be established by a long drawn process of
reasoning on points on which there may conceivably be two opinions. It has
been also held that a decision on a debatable point of law cannot be a
mistake apparent from the record. If one looks at the subsequent order
passed by the CESTAT in pursuance of the rectification application, it is
very clear that the CESTAT re-appreciated the evidence and came to a
different conclusion than the earlier one.
At an earlier point of time, the CESTAT came to a conclusion that the
company to which the respondent-assessee sold its goods was an inter-
connected company. In the circumstances, according to the CESTAT, the
decision of the department to appoint a Cost Accountant to ascertain value
of the goods manufactured by the asessee was considered to be just and
proper. However, after considering the submissions made in pursuance of
the rectification application, the CESTAT came to a different conclusion to
the effect that the asessee company and the buyer of the goods were not
inter-connected companies. Different conclusions were arrived at by the
CESTAT because it reappreciated the evidence in relation to common
directors among the companies and inter se holding of shares by the
companies. Re-appreciation of evidence on a debatable point cannot be said
to be rectification of mistake apparent on record.
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17. Similarly, in pursuance of the rectifying application, the CESTAT
came to the conclusion that an officer of the department, who was working
as Assistant Director (Cost) and who was also a Member of an Institute of
Cost and Works Accountants was not competent as a Cost Accountant to
ascertain value of the goods. It is strange as to why the CESTAT came to
the conclusion that it was necessary that the person appointed as a Cost
Accountant should be in practice. We do not see any reason as to how the
CESTAT came to the conclusion that the Cost Accountant, whose services
were availed by the department should not have been engaged because he
was an employee of the department and he was not in practice. The
aforestated facts clearly show that the CESTAT took a different view in
pursuance of the rectification application. The submissions which were
made before the CESTAT by the respondent-assessee while arguing the
rectification application were also advanced before the CESTAT when the
appeal was heard at an earlier stage. The arguments not accepted at an
earlier point of time were accepted by the CESTAT after hearing the
rectification application. It is strange as to how a particular decision taken
by the CESTAT after considering all the relevant facts and submissions
made on behalf of the parties was changed by the CESTAT. There was no
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mistake apparent on record when the CESTAT did not accept a submission
of the respondent-assessee to the effect that the officer appointed to value
the goods manufactured by asessee should not have been engaged as a cost
accountant.
18. We are not impressed by the judgments cited by the learned counsel
for the respondent. So far as the judgment delivered in the matter of Saci
Allied Products Ltd. v. Commissioner of C. Ex., Meerut, 2005(183)
E.L.T 225 (S.C.) is concerned, it pertains to sale of goods by an asessee to
an independent and unrelated dealers and its effect on valuation. The said
judgment pertains to a transaction with a related person in the State of U.P.,
at lower price and as such deals with the facts of that particular case. In our
opinion, the said judgment would not help the respondent so far as the
matter pertaining to rectification is concerned.
19. So far as the judgment delivered in Commissioner of Central Excise,
Mumbai v. Bharat Bijlee Limited, (supra) is concerned, this
Court held therein that when the Tribunal had totally failed to take into
consideration something which was on record, the Tribunal had committed a
mistake apparent on the face of the record. In the instant case, the evidence
which was on record was duly appreciated by the Tribunal at the first
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instance but the Tribunal made an effort to re-appreciate the evidence and
re-appreciation can never be considered as rectification of a mistake. We
are, therefore, of the view that the aforementioned judgment would not help
the respondent-assessee.
20. So far as judgment delivered in the case of Honda Siel Power
Products Ltd. v. Commissioner of Income Tax, Delhi, 2008(221) E.L.T
11 (S.C.), is concerned, there also the Tribunal had not considered certain
material which was very much on record and thereby it committed a mistake
which was subsequently rectified by considering and appreciating the
evidence which had not been considered earlier. As stated hereinabove, in
the instant case, the position is absolutely different.
21. This Court has decided in several cases that a mistake apparent on
record must be an obvious and patent mistake and the mistake should not be
such which can be established by a long drawn process of reasoning. In the
case of T.S. Balram v. M/s. Volkart Brothers (supra), this Court has
already decided that power to rectify a mistake should be exercised when the
mistake is a patent one and should be quite obvious. As stated hereinabove,
the mistake cannot be such which can be ascertained by a long drawn
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process of reasoning. Similarly, this Court has decided in ITO v. Ashok
Textiles, 41 ITR 732 that while rectifying a mistake, an erroneous view of
law or a debatable point cannot be decided. Moreover, incorrect application
of law can also not be corrected.
22. For the aforestated reasons, we are of the view that the CESTAT
exceeded its powers and it tried to re-appreciate the evidence and it
reconsidered its legal view taken earlier in pursuance of a rectification
application. In our opinion, the CESTAT could not have done so while
exercising its powers under Section 35C(2) of the Act, and, therefore, the
impugned order passed in pursuance of the rectification application is bad in
law and, therefore, the said order is hereby quashed and set aside. The
appeal is allowed with no order as to costs.
………..……………......................J. (Dr. MUKUNDAKAM SHARMA)
……
…...........................................J. (ANIL R. DAVE) New Delhi August 9, 2011.
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